The Indian Rupee (INR) remained steady against the US Dollar (USD), continuing to display resilience after posting losses in the previous session. The USD/INR pair hovered around 88.70 during Asian trading hours, supported by the Reserve Bank of India’s (RBI) frequent interventions, which have prevented the INR from breaching its all-time low of 88.87, last recorded on September 24.
Financial experts from Arbitics share an in-depth analysis of the subject in their latest publication.
Indian Rupee Holds Ground Amid RBI Support
The RBI has maintained a consistent presence in the foreign exchange market, deploying liquidity measures and direct interventions to stabilize the INR. These actions have been critical in keeping the currency above its record low, even as market participants monitor inflation trends, interest rate expectations, and foreign capital inflows.
Market observers note that the Indian Rupee gained modest strength in the previous session, supported by optimism surrounding India-US trade talks and steady foreign institutional investor (FII) purchases in the Indian equity cash segment since October 7.
This combination of domestic intervention and foreign inflows has helped the INR maintain stability against the Greenback.
Inflation Outlook Bolsters Rate Cut Expectations
Traders are closely watching the India Consumer Price Index (CPI) data for September, which is expected to show inflation easing to 1.7%, well below the RBI’s 2–6% target range. This softer inflation reading could increase market expectations for monetary policy easing, including potential interest rate cuts in the near term.
A lower-than-target inflation scenario often signals that the RBI has room to adopt a more accommodative policy stance, which in turn can support economic growth and relieve cost pressures on businesses and consumers.
Traders are therefore factoring inflation projections into their USD/INR positions, anticipating upside and downside volatility depending on the CPI print.
USD Under Pressure Due to Ongoing Shutdown Concerns
The US Dollar Index (DXY), which measures the USD against six major currencies, remains subdued, trading around 98.90 after losing over 0.5% in the previous session. The Greenback has faced headwinds due to a combination of geopolitical tensions and domestic policy disruptions.
The US President recently indicated there was no need for a meeting with China’s President at the upcoming South Korea summit, while also threatening 100% tariffs on Chinese imports. China warned of retaliatory measures, although the US President later issued conciliatory remarks, noting a desire to support China’s economy rather than harm it.
US Economic Data Adds to USD Volatility
The preliminary University of Michigan Consumer Sentiment Index for October edged lower to 55.0, slightly below September’s 55.1, yet better than the expected 54.2. The Current Conditions Index improved to 61.0, while the Expectations Index retreated to 51.2. These mixed readings reflect a cautious consumer outlook and ongoing economic uncertainty, impacting USD demand.
Federal Reserve (Fed) officials have also contributed to market sentiment. St. Louis Fed President Alberto Musalem highlighted that inflation remains elevated but noted potential weakness in the labor market.
Meanwhile, San Francisco Fed President Mary Daly emphasized that inflation trends are lower than feared, signaling the Fed’s intention to manage risk carefully.
The September FOMC Minutes suggest policymakers lean toward further rate cuts, with the CME FedWatch Tool pricing in nearly a 96% chance of a 25-basis-point cut in October and an 87% probability of another reduction in December.
Technical Analysis: USD/INR Tests Nine-Day EMA Support
From a technical perspective, the USD/INR pair remains muted at 88.70, trading within an ascending channel pattern. The 14-day Relative Strength Index (RSI) continues above 50, indicating a bullish bias in the short term.
On the upside, the USD/INR may target the all-time high resistance of 88.87, with a potential extension toward the upper boundary of the ascending channel near 89.50. On the downside, the pair is approaching support at the 9-day EMA of 88.70.
If the pair breaks under this support, short-term momentum could falter, potentially testing the ascending channel’s lower edge at 88.51, the October 10 monthly low.
Conclusion
The USD/INR remains supported by the RBI’s active interventions and stable foreign inflows, even as US Dollar weakness continues amid domestic political uncertainty and the ongoing government shutdown.
Softer inflation data in India could increase expectations of interest rate cuts, while technical indicators suggest a bullish bias in the short term, with the pair testing critical support and resistance levels. Traders should watch CPI data, Fed communications, and market sentiment closely to navigate USD/INR fluctuations in the coming sessions.
